Guide To Property Sales and Due Diligence in Dubai

There is a lot that a real estate professional shoulders. From fielding hundreds of client calls to managing leads and further transactions, one may, sometimes, put wind to fire and forget caution. The following article lists the importance of due diligence in a real estate transaction and advocates for its importance of property sales in Dubai, due diligence would mean that the property is investigated and evaluated with the buyer being well-informed of the property’s conditions, legal status and potential risks. A property appraisal ensures you are safe before stepping into the market hands-on. As it builds transparency and a reliable environment for property transactions when embraced across the market. 

Although, a tricky market, real estate and property Sales in Dubai and other markets has been constantly growing and expanding with changing trends and prices. Due diligence holds an important, unskippable role in this dynamic and competitive market. It means taking caution, performing calculations, reviewing documents, interviewing sellers and buyers, perusing the property and much more. With the growing demand across the real estate market, the importance of due diligence has also risen. You must know what you are selling or purchasing before being contractually bound. Following is a detailed look at what due diligence means and why it is important. 

Understanding Due Diligence

Due diligence is an inspection of the property that checks for the exact financial, physical, legal and technical conditions. An important step to assess whether the information provided is accurate, due diligence is an important step to ensure that all transactions happen before you put pen to paper. Ideally done during the negotiations, due diligence is some steps and actions that one takes to uncover any surprises within a property transaction. Without due diligence, one simply invests mindlessly. There can never be enough due diligence to avoid real estate fraud. Know the right tools and steps to ensure that you have covered your actions as needed and are safe and secure. Here are the many things that, as a seller, you must keep in mind when completing your due diligence. 

Seller’s Due Diligence

From asking to look for a buyer’s identification to confirming that your property title and agreement are completely in order, there are many actions included in a seller-centric property appraisal. You should verify your documents when the buyer approaches so you can ensure the transactions flow seamlessly from your end in the future. Checking that you are the only property owner and ensuring a buyer’s solvency and ability to finance the mortgage are other important steps in a seller’s due diligence. 

A seller should start due diligence once a prospective client comes on board to ensure smooth transactions because as the deal proceeds, the buyers, too, will have their property appraisal. A set list of steps and checklists helps speed through these processes while not missing out on any details or clients. This also helps build credibility when you can recognise a good fraud-free deal. 

• Property Title

UAE, real estate transactions, mandate that verifications be done by both parties when purchasing and selling real estate. Although the seller is confident in the buyer’s financial stability, the buyer must confirm the transaction’s legality and the accuracy of the title deed before making a real estate purchase. 

The first thing to be taken care of under a property appraisal is to confirm the seller’s ownership through a property title. There’s no point in buying or selling it when you don’t own it, and neither do they. Potential buyers request a copy of the property title deed and site plan from the seller. The title search at the Dubai Land Department confirms the seller’s ownership of the property and any existing mortgage over it, if any. This verification also reveals whether any court orders are attached to the property. 

The title also highlights the property’s specifications, which can be double-checked. Like the property’s size, common area entitlement, unit restrictions and joint owners. All this after the buyer has presented themselves with a valid power of attorney that will authorise the buyer to investigate the property. 

• Agreements and Documents

Physical agreements for everything will be essential to buyers, and another thing they will request as soon as the deal proceeds. You should have all material agreements that list the businesses you might have entered into. This includes customer agreements, supply agreements, credit or loan agreements, shareholder agreements or property leases. Government licenses and authorisation paperwork should be carefully kept. 

It is best always to have all your documents and records in perfect order, especially when a new buyer comes on the market. It is advised that as soon as a buyer comes on board for a deal, you should get your lawyer to look at the complete books, legalities and documents to ensure they are accurate and to date. Good document management goes a long way under property sales in Dubai, as it will help you recognise any business agreements and clear ambiguities. 

• Check for Mortgages and Liens

Ensure there are no incumbencies on the property on existing mortgages or lines, as the buyers will check for these. The survey will check whether a property’s zoning and construction permits are authorised. You should ensure that the property’s legal description is correct and validated. 

• Check Legal Compliance

Verifying the property’s legal status is one of the main reasons why due diligence is crucial when buying or selling real estate in Dubai. This entails confirming the property’s title deed, ownership background, and any liens or encumbrances that could impact on the property sales in Dubai. To avoid problems later on, ensure the property has a clear title and is not subject to legal challenges. Hence, checking records and financial statements is important in property appraisal. 

You should get your accountant on board and ensure all your accounts are complete and the business tax returns like income and HST have been filed. Ensure that all tax remittances have been made and any tax assets that might be beneficial when selling the property are identified.

Benefits of Due Diligence

Real estate appraisals have many benefits, which is why they are important in real estate transactions. It ensures profitable investments by identifying lucrative deals across the market. The market potential can be tricky, you could think that an under-the-radar property in a small city would not be so advantageous, but looking across the locality under due diligence, you can find that a high growth potential area increases the value for the properties, like those rare hidden deals where, at first sight, the property may not appear so promising but then ends up a very beneficial investment.

Conducting thorough investigations helps recognise this hidden potential, so if you sell your property, you will know how to price it better. Due diligence helps you avoid unserious buyers. Here are some advantages of due diligence. 

• Prevents Loss Of Property 

Property appraisals help distinguish between good and deceptive deals, which helps avoid loss of capital. You can make better real estate investments and decisions with more profitable investments highlighted. Due diligence helps you stay ahead of the game and be ready for any anomalies in the transaction. As an international business hub, Dubai is susceptible to fraudulent activities just as much as it can offer advantageous deals. So, with due diligence, you can review contracts and permissions and avoid scams for all parties involved. 

• Better Financial Transparency

Is an important part of due diligence, and its verification decides if the deal will progress. Due diligence brings financial transparency with any prior mortgages or liens on the property highlighted. This ensures that both parties are fairly aware of all the transaction details. So, an accurate financial assessment not only aids in an appropriate selling price but also prevents any unexpected post-sale financial liabilities. 

• Easier Taxes and Fees

Dubai’s property market operates in a framework of specific taxes and fees. Due diligence helps specify taxes and fees unique to the market. This can include the Dubai Land Department’s transfer fee. With property appraisals, buyers and sellers know these obligations and ensure they are paid within the required time. 

Better Safe Than Sorry

Due diligence facilitates early error detection for a property transaction before it’s too late. Sellers should start a due diligence process before the transaction begins or when a prospective client comes into the picture. Making a checklist of reviewing material contracts for change of control helps save time and money. This also helps present your business credibly and favourably to the buyer. An important step that should not be taken for granted, due diligence helps you avoid future problems and protects you against making those same mistakes.

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